Diesel prices up by 45 paise per litre from today, to be raised by 50 paise per litre every month

New Delhi: The government on Thursday took the first major step towards the deregulation of diesel prices saying oil companies will be allowed to decide the prices and hike the prices in small amounts from time to time.

Oil companies have raised diesel prices by 45 paise per litre after a go ahead from the Centre. Sources say up to 50 paise hike will take place every month. This amounts to nearly Rs 6 every year. Oil firms will be selling diesel to bulk buyers at market rates. The new prices will be effective from Friday.

Assuming there will be an increase of 50 paise per month this is how it will play out. The current diesel price is Rs 47.15. If the hike is 50 paise every month by the end of January 2013, consumers will have to pay Rs 47.65. In February consumers will have to pay Rs 48.15 paise, in March, it'll be Rs 48.65 paise. This would go upto Rs 49.15 in April and will reach Rs 53.15 in December 2013.

Earlier on Thursday, Oil and Natural Gas Minister M Veerappa Moily had said that the oil marketing companies can now decide on diesel price and change it by a small margin from time to time.

Speaking to IBN18 Editor-in-Chief Rajdeep Sardesai, Moily said that the government is following the suggestions of the Kelkar committee which advised total decontrol of diesel pricing.

Moily said, "We have now given liberty to all oil marketing companies to go in for small correction in days to come. The companies are at a liberty to do small corrections - considering all aspects."

"We have taken a first and decisive step oil companies will take a decision when full deregulation will be done," he further said.

Declining to clarify on the quantum of change in diesel price, Moily said that it is up to the oil marketing companies to decide on the amount. Refusing to use the word "deregulation", the government said that there will be small changes spread over a period of time while the Oil Secretary said that the move cannot be termed as deregulation. Moily also said the raise may taken place as early as Thursday night.

Moily said that the oil companies have been permitted to raise diesel prices by a small quantum periodically till such time that they are able to cover Rs 9.60 per litre loss they incur on the fuel.

The Oil Ministry had earlier this month made a proposal to Cabinet to raise diesel prices and increase the number of subsidised LPG cylinders available to households to nine a year from the current cap of six.

Meanwhile, the Cabinet also approved the Petroleum Ministry's proposal to increase the number of subsidised LPG cylinders available to households to nine a year from the current cap of six.

The government had sought permission from the Election Commission on Wednesday as three states - Meghalaya, Tripura and Nagaland - will go to polls soon and the model code of conduct is in force. Giving its approval, the Election Commission said the decision was not a violation of code as it was an ongoing scheme.

With effect from April 2013, all households will be get nine subsidised cylinders instead of the earlier six.

The Opposition, however, wasn't satisfied with the government's decision. "This decision by the Congress will not bring any relief to the people. Raising the cap on cylinders is not the way. They should remove the cap entirely," BJP leader Rajnath Singh said.

Left leader D Raja also said that the Opposition wanted the government to raise the cap on LPG cylinders to 12 and not just 9. Trinamool Congress leader Derek O'Brien tweeted, "The Congress-led minority govt is not managing the economy as much as damaging the economy. Raising subsidised LPG cylinder cap from 6 to 9 a year is not enough. We've been demanding 18 to 24 cylinders, 1.5 a month for a normal household."

India, which imports more than 80 per cent of its fuel needs, liberalised petrol prices in June 2010 but continues to regulate diesel prices to protect the poor. Prime Minister Manmohan Singh had recently said the country must gradually bring local fuel prices in line with global prices.

Manmohan Singh had warned that the government must raise diesel, kerosene and cooking gas prices in a phased manner as India's fuel prices are well below international prices. "Energy remains under priced in our country, with coal, petroleum products and natural gas prices well below international prices. To meet our target of rapid, inclusive and sustainable growth we must undertake a phased rationalisation of energy prices to bring them in line with world prices," he had said on Monday.